THAT EVER-INCREASING GAP BETWEEN INCOME AND CONSUMPTION

Friday, 31 March 2017

---- has been filled by borrowing" so explained The Guardian, in a 16 June 2014 article. Well, the situation has not changed since then, and those who can, are still borrowing and adding to the debt burden we all suffer under.

Under the heading The Coming ‘Tsunami of Debt’ and Financial Crisis the article reads:“Forces that caused the world economy to collapse, including income inequality and debt, are again in action, and could drag corporations down in their wake

“According to research, sectors of the American economy are building to a bubble of parallel and possibly larger scope than the conditions preceding the 2008 financial crisis. The US Congressional Budget Office is projecting a continued economic recovery. So why look down the road – say, to 2017 – and worry?

“Here's why: because the debt held by American households is rising ominously. And unless our economic policies change, that debt balloon, powered by radical income inequality, is going to become the next bust.

“Our macro models at the Levy Economics Institute are showing that the US economy is about to face a repeat of pre-crisis-style, debt-led growth, based on increased borrowing. Falling government deficits are being replaced by rising debts on everyone else's ledgers – well, almost everyone else's.

“What's emerging is a new sort of speculative bubble, this time based on consumer and corporate credit. Right now, America is wrestling a three-headed monster of weak foreign demand, tight government budgets and high income inequality, with every sign that these conditions will continue. With that trio in place, the anticipated growth isn't going to be propelled by an export bonanza, or by a government investment boom.

“It will have to be driven by spending. Even a limping recovery like the one we're nursing along today depends on domestic demand – consumer spending not just by the wealthy, but by everyone else.

“We believe that Americans will keep consuming at the same ever-rising rates of past decades, during good times and bad. But for the vast majority, wages and wealth aren't going up, so we're anticipating that the majority of Americans – the 90% – will once again do what was done before: borrow, and then borrow more.

“By early 2017, with growth likely to stall even according to CBO predictions, it should be apparent that we're reliving an alarming history. Middle- and low-income households have been following a trajectory of an ever-higher ratio of debt to income. That same ratio has been decreasing for the most well-off 10%, who are continuing to see debt decline and wealth rise….

“Forces that prompted Occupy movements protesting income inequality and financial misconduct are again in action, according to research. Why is the relationship between the debt of the 90% and the gains of the 10% so significant?”

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